Kindle Fire’s 4G package offers 250MB of data a month for $50 a year

Amazon's data package undercuts the competition, even on the same carrier.

Amazon's just-announced Kindle Fire HD LTE, which sells for $499 and begins shipping on November 20, has a killer feature that has nothing to do with its hardware or software. For $49.99 per year, Amazon is offering a data plan that gives users 250MB of data per month, 20GB of Amazon cloud storage (which normally costs $10 per year), and a $10 Amazon app store credit.

Based on the fact that the logo Amazon is using is provided by AT&T, the service compares very favorably to the data plans for the iPad and other tablets: AT&T's normal plan gives you 250MB of data for $14.99 a month, with an additional $14.99 overage charge for each additional 250MB. 3GB plans ($30 a month) and 5GB plans ($50 a month) also exist, but the Amazon plan is a much better value for users who only need a little bit of data each month. An Amazon representative told Ars that overage charges would be AT&T's standard $14.99 for 250MB.

Amazon appears to be absorbing some of the cost of this bandwidth with the cost of the tablet itself: the 4G LTE version costs $200 more than the WiFi version, while adding cellular support to an iPad costs $130. Still, the price of the Kindle Fire HD LTE is lower than that of the $729.00 32GB iPad and the $629.00 16GB iPad, making it an excellent value provided the software is up to snuff. We'll know more about that when we get some tablets in to review.

Update: Amazon's product page for the Fire HD 4G also mentions that 3GB and 5GB plans will be available for those who need more data, but doesn't list any pricing information.

Yeah, my mind boggles at that data plan. Not because it's not reasonable - because in the absence of wireless carrier greed, it totally is - but just how does a company negotiate something so disparate from the norm?

to me, an alternative pricing model for a cell data connected device is the real news here. other vendors have been pricing data at crazy person prices...when we know all along that modest data (kindle keyboard 3g) is cheap enough that it can be "free" with the purchase of the device in the first place, also knowing that at least some of the data consumption also brings in revenue (ie buying or even browsing books, or shopping on amazon.com).

Its kind of weird seeing companies compete to provide the least amount of data for the least amount of money. Maybe that's not what's actually going on, but it sure looks that way.

I own a DUMB Phone and am going to stick with my stupid fliptop phone.I will use it for only phone calls and I will just sit back and watch the Price Gouging go on.I really do not want to be giving these Telcos Money to not only Throttle me but to also Cap my Service charging me very high Rates for what in reality Costs them mere pennies to do.We need to expose their scams somehow to the larger Media and Educate the Sheeple.If it can reach their brains they will not be happy either.

So how much are they actually going to lose on this? Since Amazon is willing to do business while making virtually no profit, it seems as though losing money on products is just dandy for them. But everyone else, except Microsoft, who also Likes losing money on products, needs to make a profit.

I just don't see how they can ever make up the losses. They make the same percentage profit on content Apple makes, and that's just 3-5% per dollar sold. But Apple uses that as a leader to buy their hardware, which makes sense. Amazon is using losses on hardware to get people to buy that low profit content, which doesn't make sense. This isn't the razor and blades thing that some people like to quote. With the razor, you're locked into buying the blades, because no others will fit. And the blades make quite a lot of profit, so the cheap razor they take a couple of bucks loss on is irrelevant.

I just do t see how this. Odell works for them. They would have to sell hundreds of dollars of content a year to someone buying the $199 Fire. This expensive one probably would need even more sales. A lot more.

to me, an alternative pricing model for a cell data connected device is the real news here. other vendors have been pricing data at crazy person prices...when we know all along that modest data (kindle keyboard 3g) is cheap enough that it can be "free" with the purchase of the device in the first place, also knowing that at least some of the data consumption also brings in revenue (ie buying or even browsing books, or shopping on amazon.com).

edited for clarity. serenity now

You buy a book over cellular, ATT takes their pound. Congratulations, you've still paid them but shifted the cost to the marginal cost of providing books.

Personally, as someone who doesn't read books, I can basically freeload off the tons of people who do read books and pay for my service with their overpriced 3G/4G purchases.

Amazon sure has a lot of clout. Maybe next time they'll use it to secure humane monthly fees for higher data caps. You know, for those of us who don't use data like it's some top-shelf single malt, or moon dirt.

So how much are they actually going to lose on this? Since Amazon is willing to do business while making virtually no profit, it seems as though losing money on products is just dandy for them. But everyone else, except Microsoft, who also Likes losing money on products, needs to make a profit.

I just don't see how they can ever make up the losses. They make the same percentage profit on content Apple makes, and that's just 3-5% per dollar sold. But Apple uses that as a leader to buy their hardware, which makes sense. Amazon is using losses on hardware to get people to buy that low profit content, which doesn't make sense. This isn't the razor and blades thing that some people like to quote. With the razor, you're locked into buying the blades, because no others will fit. And the blades make quite a lot of profit, so the cheap razor they take a couple of bucks loss on is irrelevant.

I just do t see how this. Odell works for them. They would have to sell hundreds of dollars of content a year to someone buying the $199 Fire. This expensive one probably would need even more sales. A lot more.

You, sir, are underestimating profitability. Amazon takes their pound of flesh. 30% on apps, I believe, same as Apple and Google (and Microsoft?). That's also their cut on the "self-published" digital books they sell. Amazon also has a "self-published" DVD service, although I'm not sure what the margins on that are or if they've moved to digital distribution yet.

Just makes me want to love AT&T even more for paying $15/month for the exact same service.

Except of course that AT&T's LTE coverage doesn't yet exist outside the major metro areas (anyone know how good it is there?) and with a regular plan you fall back to 3G service. Does this new Fire even have a 3G radio or is it strictly LTE?

Yeah, my mind boggles at that data plan. Not because it's not reasonable - because in the absence of wireless carrier greed, it totally is - but just how does a company negotiate something so disparate from the norm?

They buy excess bandwidth in bulk. After that, they can do whatever they want with it, including losing money on every device they sell with it.

So how much are they actually going to lose on this? Since Amazon is willing to do business while making virtually no profit, it seems as though losing money on products is just dandy for them. But everyone else, except Microsoft, who also Likes losing money on products, needs to make a profit..

Two words to explain their model: Console industry

This has never been about the device but about content. A device is purchased maybe once every couple years by a person. (This is what Apple is desperately trying to change by leaving out features to make people cough up the money for a new device every year.) Content on the other hand is purchased year round. Movies, music, books, apps all are purchased in small 99 cent to 5 dollar, to $15 dollar chunks which add up over time.

It will be interesting to see what Apple does for storage capacity on the upcoming iPhone. It's been awhile since they bumped the numbers. In the meantime Moore's Law has been hard at work. I'll be disappointed if we don't see the Flash numbers doubled to 32, 64 and 128GB. If they do that one would expect the iPad to soon follow.

So how much are they actually going to lose on this? Since Amazon is willing to do business while making virtually no profit, it seems as though losing money on products is just dandy for them. But everyone else, except Microsoft, who also Likes losing money on products, needs to make a profit.

I just don't see how they can ever make up the losses. They make the same percentage profit on content Apple makes, and that's just 3-5% per dollar sold. But Apple uses that as a leader to buy their hardware, which makes sense. Amazon is using losses on hardware to get people to buy that low profit content, which doesn't make sense. This isn't the razor and blades thing that some people like to quote. With the razor, you're locked into buying the blades, because no others will fit. And the blades make quite a lot of profit, so the cheap razor they take a couple of bucks loss on is irrelevant.

I just do t see how this. Odell works for them. They would have to sell hundreds of dollars of content a year to someone buying the $199 Fire. This expensive one probably would need even more sales. A lot more.

You, sir, are underestimating profitability. Amazon takes their pound of flesh. 30% on apps, I believe, same as Apple and Google (and Microsoft?). That's also their cut on the "self-published" digital books they sell. Amazon also has a "self-published" DVD service, although I'm not sure what the margins on that are or if they've moved to digital distribution yet.

the 4G LTE version costs $200 more than the WiFi version, while adding cellular support to an iPad costs $130.

You also get an additional 16GB of space over the WiFi-only version.

While true, it isn't like that 16GB space costs very much. <$20?

Tell that to Apple.

You guys don't understand this. You should know by now that there are different kinds of flash. You can buy a 32GB compact flash card, for example, for $30 or for $200. Depends on the speed of the chips. Also the interface. Too many people look at the cheapest flash and assume that's what's being used in phones and tablets. Not true for higher end models. Maybe true for cheap ones. But even then, the cheapest isn't being used.

And then, all manufacturers charge two to three times the cost of the parts for a finished product. So for $40 of chips, we would get charged between $80-$120. Nothing new here, it's what they all do.

So how much are they actually going to lose on this? Since Amazon is willing to do business while making virtually no profit, it seems as though losing money on products is just dandy for them. But everyone else, except Microsoft, who also Likes losing money on products, needs to make a profit.

I just don't see how they can ever make up the losses. They make the same percentage profit on content Apple makes, and that's just 3-5% per dollar sold. But Apple uses that as a leader to buy their hardware, which makes sense. Amazon is using losses on hardware to get people to buy that low profit content, which doesn't make sense. This isn't the razor and blades thing that some people like to quote. With the razor, you're locked into buying the blades, because no others will fit. And the blades make quite a lot of profit, so the cheap razor they take a couple of bucks loss on is irrelevant.

I just do t see how this. Odell works for them. They would have to sell hundreds of dollars of content a year to someone buying the $199 Fire. This expensive one probably would need even more sales. A lot more.

You, sir, are underestimating profitability. Amazon takes their pound of flesh. 30% on apps, I believe, same as Apple and Google (and Microsoft?). That's also their cut on the "self-published" digital books they sell. Amazon also has a "self-published" DVD service, although I'm not sure what the margins on that are or if they've moved to digital distribution yet.

Where did you hear about 3-5%?

Quote:

That 30% is their cut of revenue, that's not their profit.

That's right.

30% is their cut, true. But only 3-5% of the total sale is profit. This has been agreed upon amongst all the financial people who work with this. It's not a figure I just came up with. That 30% cut is mostly spent running the business of the download store, advertising, and all the other expenses. What remains out of the initial dollar is between 3 and 5 cents for profit. This really isn't in dispute.

It will be interesting to see what Apple does for storage capacity on the upcoming iPhone. It's been awhile since they bumped the numbers. In the meantime Moore's Law has been hard at work. I'll be disappointed if we don't see the Flash numbers doubled to 32, 64 and 128GB.

While Flash has been getting cheaper the screen and probably the battery have been getting more expensive. Some of the margin increase relative the Flash components goes into buying more expensive other ones ( camera , screen , etc. ). There are some very heft profits in there too ( $100 to go from 16 to 32 ... not really ).

If the iPhone5 bumps the screen size then it probably got more expensive. Or at least isn't less expensive now than it was. Likewise if they add some other component that costs more money than last generation.

You, sir, are underestimating profitability. Amazon takes their pound of flesh. 30% on apps, I believe, same as Apple and Google (and Microsoft?). That's also their cut on the "self-published" digital books they sell. Amazon also has a "self-published" DVD service, although I'm not sure what the margins on that are or if they've moved to digital distribution yet.

Where did you hear about 3-5%?

3-5% is on a good day.

Quote:

Amazon’s Q2 numbers are wild. And the release is just odd (why the quote about Amazon Prime, exactly?). Sales were up, but:

Net income decreased 96% to $7 million in the second quarter, or $0.01 per diluted share, compared with net income of $191 million, or $0.41 per diluted share, in second quarter 2011.

the 4G LTE version costs $200 more than the WiFi version, while adding cellular support to an iPad costs $130.

You also get an additional 16GB of space over the WiFi-only version.

While true, it isn't like that 16GB space costs very much. <$20?

Tell that to Apple.

You guys don't understand this. You should know by now that there are different kinds of flash. You can buy a 32GB compact flash card, for example, for $30 or for $200. Depends on the speed of the chips. Also the interface. Too many people look at the cheapest flash and assume that's what's being used in phones and tablets. Not true for higher end models. Maybe true for cheap ones. But even then, the cheapest isn't being used.

And then, all manufacturers charge two to three times the cost of the parts for a finished product. So for $40 of chips, we would get charged between $80-$120. Nothing new here, it's what they all do.

Look at your numbers. We are saying the boost from 16Gb to 32 Gb costs less than $20 in parts and we get charged an extra $100.

You are saying that if the price is $100 higher, the parts must cost $33.

Is that tiny difference even worth arguing about? I'm not sure we disagree in any meaningful way about the numbers.

Now, I would say the margin on the hardware is less than the 50-70% you are claiming (=two to three times markup). I don't think these manufacturers have the luxury of a markup that high. You could argue that it is assembly, retail costs, etc. But if you replace one piece of 16Gb memory with a similar 32Gb memory, none of those costs increase.

So basically, the margin on these devices is not that high but any optional upgrades get charged at an extra premium because that is where the manufacturer can make back some of the lost margin on the base. I think what you are saying is that this is normal and ok, and I am saying it's normal but a rip-off. A rip-off that motivates manufacturers to create devices that are limited to create the illusion of a low baseline price (e.g. starting with only 16 Gb) or limited to prevent the user from improving the device themself (e.g. device glued together, no SD slot).

If they didn't get to take advantage of this rip-off, devices would be superior to what we get now.

Bezos says he doesn't want to make money on hardware, but at $499 he certainly is. But there are two problems: 1) $499 is too close to real tablet (iPad) pricing.

Except for that whole cellular radio and extra memory thrown in. No, the two tablets are not directly comparable, but the $499 price point is not exclusive to Apple. And people who are already invested in Amazon's ecosystem will find this a viable alternative for many uses.

Quote:

The 250 MB data plan is silly.

At $15 per month, yes. At $4.17 per month it's not bad for many light users.

Surely the 4G is only used when you are out of wi-fi range? 250Mb is enough for browsing and email when out of wi-fi range. Within wi-fi range there is no 4G usage for streaming video, online gaming etc.

30% is their cut, true. But only 3-5% of the total sale is profit. This has been agreed upon amongst all the financial people who work with this. It's not a figure I just came up with. That 30% cut is mostly spent running the business of the download store, advertising, and all the other expenses. What remains out of the initial dollar is between 3 and 5 cents for profit. This really isn't in dispute.

It should be disputed. It is very likely not the same range for both companies. Perhaps Amazon is 6-8 and Apple is 3-4, but it isn't the same. Practically Amazon's whole corporate operation based on running a massive IT operation. Amazon runs server for major social networking players. Heck at one point parts of Apple's "cloud" was being served up by Azure and/or Amazon. Amazon sell's TVs, Macs (about everything you can buy at Apple's Online store you can buy at Amazon) , Laundry detergent , shoes , make-up , halloween costumes , etc. etc etc. Amazon even sells cloud cluster compute time. They skill and scope of IT operations at the two companies is not the same.

In the short the scope of the web stores run by both companies is *vastly* different. So it is extremely likely the economies of scale are *not* the same for both companies when it comes to running and operating their IT operations. Therefore, the webstores margins will not likely be the same. There is nothing in Apple's track record to point at them being superhuman when it comes to running IT as levels far and above the largest, oldest players on the Internet.

This is also where you miss the point of where the profits are coming from. Once Amazon has convinced a high fraction of Fire owners to just Amazon Prime many will be very inclined to buy more than "Apps" at Amazon. If everything just ships free they will buy more and also inform Amazon of what they like to buy over a much broader set of items than just "iFart" and "Angry Bird" like apps.

You right in one sense. The App stores as for as being profitable storefronts suck. They are largely a 'race to the bottom' operations where tons of overhead going into selling free stuff and enabling other folks to make money off of ads. From a merchandizing perspective it is a crummy business to be in. That isn't what Amazon is driving folks toward though. Other more profitable merchandise, subscriptions, and increasingly larger share of their customers disposable income.

Tell that to any manufacturer who omitted the SD card slot so they could charge you a huge markup on the memory. If they're polite, they'll try not to break into maniacal laughter.

Funny how otherwise rational sounding people conveniently ignore the fact that expandable storage means managing 2 storage volumes which is a HUGE NEGATIVE compared to "all-in-one" storage. Not to mention what happens if you try using a subpar SD card with a lower class speed.

Just makes me want to love AT&T even more for paying $15/month for the exact same service.

Except of course that AT&T's LTE coverage doesn't yet exist outside the major metro areas (anyone know how good it is there?) and with a regular plan you fall back to 3G service. Does this new Fire even have a 3G radio or is it strictly LTE?

Bezos says he doesn't want to make money on hardware, but at $499 he certainly is. But there are two problems: 1) $499 is too close to real tablet (iPad) pricing. The 250 MB data plan is silly.

This dog won't hunt.

Those capable of paying $499 will buy an iPad instead.

Bezos was initially smart with the introduction of the original Fire. It was not an iPad competitor. But now he tries to compete. Fail.

Except, by my calculations, there are three (!) Kindle Fires that are all significantly cheaper than the iPad, and $499 buys you an iPad with 16GB less storage and no 4G at all. Not quite apples-to-apples (pun possibly intended?).